The NFIB index rose 2.4 points to 99.8 in July, beating forecasts of 97.5, but 36% of owners still cannot fill their open roles.
The NFIB Small Business Optimism Index rose 2.4 points in July to 99.8, its highest reading since August 2025 and a move back above the survey’s 52-year average of 98.0.
The result beat forecasts. Economists had penciled in 97.5 ahead of the release, making July the clearest upside surprise in the series this year.
For owners of established firms, the composite number matters less than what moved it. Eight of the index’s 10 components rose. The largest single contribution came from hiring plans, which points to something concrete: businesses that spent much of the past year holding headcount flat are preparing to add people again.
Hiring Plans Did the Heavy Lifting
The NFIB Small Business Employment Index climbed to 102.1 in July, ending four straight months of decline. Plans for capital expenditure improved alongside it.
“Small business optimism rose again in July, with a significant increase in owners expecting to hire, accompanied by an improvement in plans to make capital expenditures,” said Bill Dunkelberg, chief economist at the National Federation of Independent Business.
Two components moved the other way. Real sales expectations fell 2 points, and the share of owners reporting inventories as too low dropped by the same margin. Firms are staffing up faster than they are restocking, which suggests the confidence is concentrated in labor capacity rather than in near-term demand.
The Constraint Sits on the Supply Side
Wanting to hire and being able to hire are different problems, and the survey separates them clearly.
A seasonally adjusted 36% of owners reported job openings they could not fill, up 4 points from June and the highest reading since June 2025. That figure moved in the same direction as hiring plans rather than against them, which means the pool of available workers is tightening at precisely the moment demand for them returns.
The cost shows up in pay. A net 31% of owners said they had raised compensation, up 3 points from June. For a business running on thin margins, a wage increase granted to win a hire is permanent, while the revenue expected to justify it is a forecast.
Firms in construction, professional services and the skilled trades carry the sharpest version of this problem, since an unfilled role caps billable capacity directly rather than merely stretching an existing team.
The distinction matters for planning. An owner reading only the headline sees sentiment at an 11-month high; an owner reading the components sees a labor market that has grown tighter, a compensation line that has moved up three months in a row, and sales expectations that slipped. Those are three different inputs to a budget, and they do not point the same way.
Confidence and Uncertainty Rose Together
The more awkward detail in the July report is that both measures increased at once.
The NFIB Uncertainty Index rose 2 points to 91, well above its historical average of 68. Owners are more willing to commit to hiring and equipment, and simultaneously less sure about the conditions those commitments depend on.
That combination argues against reading the headline number as a durable turn. A single monthly print above a long-run average is a data point, not a trend, and the index has crossed 98.0 before without holding there. Sentiment surveys also measure intent rather than action: hiring plans and capital spending plans are statements of what owners expect to do, and neither obligates them to do it. The July survey records a change in posture, not yet a change in payrolls.
“Although uncertainty is currently elevated, Main Street anticipates that business conditions will continue to improve,” Dunkelberg said.
What to Watch Next
The August survey, due in early September, will show whether hiring intentions convert into filled positions or stall against the same shortage that capped them in June. The gap between the employment index and the unfilled-openings rate is the specific number to track.
For firms budgeting the rest of the year, the July data argues for treating wage assumptions as the variable most likely to break a plan. Compensation increases granted now set a permanent floor under payroll, and the survey shows competition for staff intensifying rather than easing.
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